Dormant company accounts are simplified annual accounts prepared by a company that is not doing business and has not received any income (e.g. bank interest or investments) or made any payments during its financial year.
Instead of filing more comprehensive annual accounts at Companies House and delivering a Company Tax Return with full accounts to HMRC, dormant companies can prepare a simple balance sheet for Companies House.
If a company is considered dormant by Companies House for an entire accounting period, it won’t have any ‘significant accounting transactions’. A significant accounting transaction is one that a company must enter in its accounting records. It refers to any income or expenditure other than:
If your company is dormant, you can save time and money by filing dormant company accounts rather than full accounts. The requirements are very simple, so you won’t need the help of an accountant to prepare them.
Dormant company accounts only need to include the following information:
Unlike full statutory accounts, dormant accounts don’t need to include a profit and loss account, a director’s report, or (if exempt) an auditor’s report.
Be aware that you may have to prepare full annual accounts for members if they ask you to do this. However, you won’t have to file a Company Tax Return and full accounts with HMRC unless the company starts trading.
At Rapid Formations, we offer a Dormant Company Accounts Service for just £49.99 per year. This is suitable for companies that satisfy the following requirements:
Once you’ve purchased the service, we will email you a simple online questionnaire requesting the following details:
This information ensures we can prepare and submit your accounts correctly. Upon receiving your responses to the questionnaire, we will file your dormant company accounts at Companies House within one working day.
You don’t need to have formed your limited company with Rapid Formation to use our Dormant Company Accounts Service.
Alternatively, you may be able to submit dormant accounts on Companies House form AA02. This option is only available to companies limited by shares ( not limited by guarantee) that have never traded.
Once received and processed, your dormant accounts (like all types of company accounts) are made publicly available on the Companies House register .
If your limited company is not eligible to submit accounts using our service or form AA02, you can file your dormant accounts on the Companies House service instead. It is suitable for companies limited by shares and companies limited by guarantee , including those that have previously traded.
While your company remains dormant, you must prepare and file dormant company accounts with Companies House once a year. You have the same amount of time to file dormant accounts as you do to file other types of accounts.
The deadline for sending accounts to Companies House is normally 9 months after your accounting reference date (ARD). Your ARD marks the end of your company’s financial year. It falls on the anniversary of the last day of the month of incorporation (unless you change your company’s year-end ).
However, if you are submitting your company’s first accounts, the filing deadline is 21 months after the date of incorporation.
You can make your company’s accounts up to 7 days either side of its accounting reference date.
Companies House imposes late filing penalties for all types of accounts. If you deliver your dormant company accounts after the filing deadline, you will incur the following penalties:
If you file late accounts in two successive financial years, the penalty will be double (e.g. £300 rather than £150 if the accounts are up to 1 month late). The penalties listed above apply to private companies. They are higher for public limited companies.
A dormant company is exempt from audit if it has been dormant since incorporation or the end of its previous financial year and satisfies the following conditions:
Under certain circumstances, a dormant company that is also a subsidiary can claim exemption from preparing accounts, filing accounts at Companies House, or both.
If your dormant company is also a subsidiary, you may not have to file dormant accounts with Companies House if the company meets a number of criteria, including:
In this situation, it may be possible to claim exemption from:
If you claim exemption from preparing accounts, you don’t have to send them to Companies House or prepare full accounts for the subsidiary’s members.
If you claim exemption from filing accounts, you must prepare annual accounts for the subsidiary but you don’t have to send them to Companies House.
It is also possible to claim exemption from audit as a subsidiary company .
The term ‘dormant’ has different meanings at Companies House and HMRC. It’s important to understand these definitions.
A company is dormant according to Companies House if it has had no significant accounting transactions in its financial year. As previously mentioned, all forms of income and expenditure are deemed significant apart from the following:
A company is usually dormant for Corporation Tax purposes (with HMRC) if it:
Therefore, your limited company is most likely dormant if it is not trading (not doing business), not receiving other forms of income (e.g. from investments), and not spending any money.
‘Trading’ refers to a wide range of activities, all of which can make a company active for Corporation Tax purposes. These include:
HMRC provides detailed guidance for new and existing companies on what counts as dormant for Corporation Tax purposes .
To avoid accidentally forfeiting your dormant company status, you should refrain from opening a business bank account. If you have one already, it would be best to close it while your company is dormant. Incurring even one bank charge would make your company active for Corporation Tax and liable to file a tax return and full accounts with HMRC.
You do not need to tell Companies House if your company is dormant. If it’s dormant, you would simply file dormant company accounts when the time comes. Some companies like to change the company’s SIC code to 99999 (indicating “dormant”), but this has no legal effect and merely publicly identities that the company is probably dormant and not trading.
However, you must tell HMRC that your company is dormant for Corporation Tax purposes as soon as possible. If you fail to do so, HMRC will assume the company is trading and require you to file a Company Tax Return with full annual accounts.
If you receive a notice to file a Company Tax Return and fail to deliver one, HMRC will impose late filing penalties.
There are many reasons why a company may be dormant. Below are some common scenarios:
There is no legal requirement to make your company dormant in these situations. However, doing so can simplify matters and save you time and money on certain administrative obligations.
Please comment below if you have any questions about this post, or contact our London-based team if you’d like to speak to us about our Dormant Company Accounts Service.
For more limited company guidance and small business advice, explore the Rapid Formations Blog .